SEC Charges Florida Man Over $860K Scheme Targeting Police Officers
The U.S. Securities and Exchange Commission on Sept. 23 charged a Port St. Lucie, Florida, man and his company over an alleged fraudulent investment scheme. The SEC said the scheme raised about $860,000 from at least 18 investors, many of them current or retired law enforcement officers who trusted him because he worked for a police and firefighter pension plan administrator.
The SEC filed its complaint in the U.S. District Court for the Southern District of Florida. It said Michael D. Williams and CMI Capital LLC, which did business as Check Mate Investments, solicited investments from October 2023 through August 2024 for two pooled funds called CMI Fund 1 and CMI Fund 2. Neither fund was ever incorporated. Williams never opened a brokerage account for CMI or either fund, according to the complaint. Instead, investor money went into his personal bank account and then into his personal brokerage accounts.
Without admitting or denying the allegations, Williams and CMI agreed to a bifurcated settlement, subject to court approval.
Scheme Basics
The defendants sent investor letters in January, April, and May 2024. According to the complaint, the letters said CMI’s options strategy had “provided year-over-year performance of 187% with 2023 being 331% returns.” They also said the funds would be managed “with little to no risk.” The SEC alleges the strategy was based entirely on Williams’ own options trading, which lost money every year from 2020 through 2023, including a 65% loss in 2023.
The complaint said the reported performance was also fabricated. On July 31, 2024, Williams told a Check Mate Investments Facebook group chat that Fund 1 had “breached the $5 mill mark.” He posted a tightly cropped screenshot showing a “Net Liq” balance of $5,079,694.05, which the SEC said came from a practice trading platform. An Aug. 1 investor report claimed Fund 1 had returned 141.08% since it started in January 2024 and was worth $5,062,702. A report for Fund 2 claimed an 8.1% gain in one month and a value of more than $2 million.
In April 2024, Williams told the group that Fund 1 was $40,000 away from a $1 million portfolio value, according to the complaint, and posted GIFs from the movie “The Wolf of Wall Street.”
“We allege that one of the tactics the defendants used to trick investors was to send them cropped screenshots of graphics that showed exorbitant trading profits,” Stephanie N. Moot, director of the SEC’s Miami Regional Office, said in a statement.
The SEC said the strategy actually lost money in every month of trading during the period, and total trading losses reached at least $428,000.
According to the complaint, Williams worked as an administrative assistant and pension plan administrator at a pension administration company in West Palm Beach. The complaint did not name the company and said it did not take part in the scheme. Without the company’s knowledge, Williams often used his work email to solicit investors. At least once, he met investors at the company’s satellite office inside the Police Benevolent Association in West Palm Beach, the SEC said.
The defendants also recruited through a Facebook group that charged $100 for investment advice, and they asked investors to refer friends and family. The complaint said CMI did not take reasonable steps to confirm that investors were accredited, and several were not. Investors lived in southeast Florida and Georgia.
The SEC alleges Williams took at least $383,675.37, or about 45% of the money raised. That includes at least $249,000 for his personal credit cards and loans, including his mortgage; $41,333.47 in cash withdrawals; and $27,146.10 in auto expenses. Investor money also paid for a high-end sports car, luxury car rentals, jewelry, vacations, restaurants, and medical spa treatments, according to the complaint.
The scheme came apart in August 2024 when investors realized the returns came from a simulated account. Before the SEC’s investigation, the defendants returned at least $375,000 to some investors, mostly using money from Williams’ family, the complaint said.
SEC Charges
The SEC charged both defendants with violating the registration and antifraud provisions of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8. That rule covers advisers to pooled investment vehicles whether or not they are registered. Neither Williams nor CMI has ever been registered with the SEC or held a securities license.
Under the proposed judgments, both defendants would be permanently enjoined from violating the charged provisions. Williams would also be barred from taking part in the issuance, purchase, offer, or sale of any security, except trades in his personal accounts. The court would set disgorgement with prejudgment interest against Williams and civil penalties against both defendants. Williams also agreed to an associational bar, which has not yet been issued.
Visit the AltsWire directory page.
